Distribution Channels are the major factors that determine the success of any sales and marketing strategy. Distribution has become the most important part of a business nowadays, with the increase in the number of products and services. Distribution refers to the actual process of creating a product or service accessible to the consumer or company user who requires it. This can either be done directly by the manufacturer or distributor or via intermediaries or third-party channels. Distribution can either take place within the same geographical area or across international boundaries.
Distribution can either be long term or short. Long term distribution channels are usually handled by large corporations such as the manufacturer who distributes his products through retailers and warehouses. The manufacturer may establish direct or indirect distribution channels for particular products or services. Short term distribution channels include warehouses, shops, kiosks, or distribution points located in strategic places. Some of these points may be managed by third-party intermediaries or distributors.
Distribution can affect the performance of an organization in a number of ways depending upon the type of distribution channel chosen. Long term wholesale and retail demand chain affect the demand in the market. Supply chain management determines the supply chain parameters such as the capacity to manufacture, identify, and deliver merchandise to the final consumers. The efficiency of a manufacturing company is also determined by supply chain parameters such as customer satisfaction, cycle times, defects, lead times, and waste.
Distribution channels therefore determine the performance of a manufacturing company. Distribution channels include manufacturers, wholesalers, retailers, and third-party intermediaries. Distribution channel decisions affect the volume, price, and quality of a product offered to the market. Some of the distribution channels include retail selling, retail outlet, and point of sale.
There are different types of distribution channels and the strategies used for each type varies. For example, distributors can either choose to directly sell products to customers, or they can perform direct sales through warehouses, shops, kiosks, or distribution points. Wholesalers purchase from manufacturers, repackage the products and distribute them to retailers or customers. Distributors can use any number of distribution channels to sell their products to the market. Most wholesalers operate on a nationwide scale, while there are many small-scale distributors that have local markets.
There are two main types of distribution channels: direct selling and indirect selling. Direct selling involves direct contact between a manufacturer and a retailer or customer. Indirect selling involves a retailer or dealer purchasing directly from a manufacturer or supplying by a manufacturer to a retailer or customer. Both indirect and direct selling methods make use of wholesalers, drop shippers, and distributors.